Good morning, and welcome to the First Quarter 2024 AXIS Capital Earnings Conference Call [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Cliff Gallant with Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to our first quarter 2024 conference call. Our earnings press release and financial supplement were issued last night. If you'd like copies, please visit the Investor Information section of our website at axiscapital.com. We set aside an hour for today's call, which is also available as an audio webcast on our website. Before we begin, I would like to invite you all to attend our Investor Day being held the morning of May 30 in New York City and also webcast. If you would like an invitation to the call, please e-mail me at cliff.gallant@axiscapital.com. Joining me on today's call are Vince Tizzio, our President and CEO; and Pete Vogt, our CFO. In addition, I would like to remind everyone that the statements made during this call, including the question-and-answer section, which are not historical facts, may be forward-looking statements. Forward-looking statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from those projected in the forward-looking statements due to a variety of factors, including the risk factors set forth in the company's most recent report on the Form 10-K or our quarterly report on the Form 10-Q and other reports the company files with the SEC. This includes the additional risks identified in the cautionary note regarding the forward-looking statements in our earnings press release issued last night. We undertake no obligation to publicly update or revise any forward-looking statements. In addition, non-GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial supplement. And with that, I'll turn the call over to Vince.

Thank you, Cliff, and good morning, everyone. Thank you for joining our call. We had a very good start to the year with Q1 marking another strong underwriting quarter of profits and growth for AXIS. We continued to generate consistent double-digit ROE, combined ratios in the low 90s, profitable growth and book value per share growth. Indeed, our team is playing offense and the positive momentum that we generated last year has continued into 2024 as we further elevated our financial performance across a number of indices. I'm very appreciative of my colleagues for their deep commitment to delivering consistent value creation while providing excellent service to our partners and customers. Now I'd like to share some of the headlines for the quarter. In a quarter where industry catastrophe losses totaled nearly $20 billion, we produced an annualized ROE of 18.2%, a combined ratio of 91.1%. Importantly, our reserve position at the end of the quarter remains strong, and we feel very good about the actions we took in the fourth quarter. We continue to achieve double-digit growth by capitalizing on favorable conditions across our chosen markets while exhibiting underwriting discipline and strong cycle management. In the quarter, we generated $2.7 billion in gross premiums written, 11% increase over the prior year. This included $669 million in new business premiums, a 27% increase as we continue to grow in our targeted markets while tapping into new sources of revenue. Lastly, we reduced our GA ratio by 0.6 point compared to 1Q '23. These results evidence the strengthened path that AXIS is on. Throughout AXIS, there is a clear focus on advancing our strategy and achieving our financial objectives. I'll briefly speak to several of the core elements that are underpinning our strategy. First, we continue to operate in attractive markets,…

Thank you, Vince, and good morning, everyone. AXIS had very strong performance in the quarter. Our net income to common shareholders was $388 million or $4.53 per diluted common share, which resulted in an annualized ROE of 32.1% and drove our book value per diluted common share to $57.13 at quarter end. Our operating income was $220 million or $2.57 per diluted common share, the highest quarterly EPS in our company's history, which resulted in an operating ROE of 18.2%. I'll first address the Government of Bermuda's Income Tax Act and the provision referred to as an economic transition adjustment. After detailed analysis, we recorded a deferred tax asset of $163 million in the quarter. This amount was included in net income and excluded from operating income. Moving on to our consolidated results. Our company-wide gross premiums written grew 11.4% as we continue to see attractive pricing across most lines of business. Our current accident year loss ratio, ex cat and weather, was an excellent 56.4%. Importantly, our loss picks were consistent with the learnings from our in-depth reserve review conducted at the end of last year. Additionally, we did have exposure to the Francis Scott Key Bridge tragedy and this impacted the quarter ex cat and weather loss ratio by about 1.5 points with some loss in both segments. Pretax cat and weather-related losses, net of reinsurance, totaled $19.8 million or 1.5 points in the quarter. We highlight that for the industry, the quarter was quite active with over $20 billion of global catastrophe losses, and our share of those losses was remarkably small. Prior period development was nil in the quarter, and we saw very little underlying movement by class of business and by accident year. Given how recently we undertook our deep dive reserve review, we are…

[Operator Instructions] The first question is from Dean Criscitiello with KBW.

I was hoping to get a little bit more color on capital deployment. I know you just mentioned the share repurchases were strong in the first quarter. How could we think about share repurchases for the remainder of the year and next year, given that you said that you would prefer a preference for organic growth?

Dean, this is Pete. I'll take that. Right now, we really -- as we've talked about in the past, our #1 priority for capital use is growth of profitable business. We do feel and we do know our capital position is very strong right now and we will continue to utilize our current authorized amount of $100 million through the remainder of the year, and I would expect us to use that up over the course of the next few months. As for other capital deployment, if there's any more actions when it comes to share buyback, we'll be talking with our Board in the next few weeks, and we'll consider other deployment for capital. But right now, we see very attractive opportunities in our insurance business, especially, and we really are looking to put capital to work in growing the insurance business.

Dean, this is Vince Tizzio, just to add to Peter's answer. As we think about capital management in the company, we think about our toolkit in a number of different ways. Pete mentioned our share repurchase program, which we've exhausted some $60-odd million part of the $100 million. Additionally, Pete mentioned investing in the business. You saw the 11% growth that we put forward in the insurance business. You saw the inclusion of a number of new teammates. You saw the mention which is a complement to what we stated in the fourth quarter about new revenue sources. This all takes capital. And then finally, we have a How We Work program that's being undertaken and in its earliest of days. And that, too, will require capital expenditure as we continue to invest in the new capabilities that we're bringing to bear in order to bring more perfected efficiency to the organization as well as best -- better risk insights that ultimately drive better risk selection. Thank you for your question.

And my next one was on the insurance liability lines. I appreciate all the color you gave around the corrective actions you've taken in that book. But thinking about growth in the future, what sort of market dynamics are you looking to see in order to sort of reaccelerate growth within that book?

Dean, this is Vince again. So firstly, we took a number of strong underwriting actions through the fourth quarter, extending into the first quarter, really in complement to the reserve strengthening action that we executed in the 4Q. That body of work continues. Our leadership team in North America has worked very hard at reshaping the kind of classes that were willing to have a risk reward that we think is fair. In our primary casualty business in the quarter, we obviously did not grow that business. That was a purposeful action. Our excess casualty business grew, as I noted in my opening remarks, we have very different underwriting appetites between the two. We have very strong limit management in our excess casualty business and a very strong reinsurance program. But direct to your question in the primary liability market, that will be a market that we act with caution. We're out in our primary channel distribution through wholesale. We're prosecuting a strategy with a redefined underwriting appetite, and it's a business that will be graduated over time.

The next question is from Josh Shanker with Bank of America.

A couple of questions, I think mostly for Pete. I noticed on the fixed maturity portfolio there's a little step down in the yield in the quarter. Are we near the terminal yield for this portfolio? Or are there some quirks and that should continue to rise as you redeploy shorter or lower-yielding investments into higher-yielding investments?

Thanks, Josh. This is Pete. Yes, we do expect with the current new money market yield being 5.6% that we will continue to see some increases in the fixed income yield through the rest of this year. That is our true expectation. I think some of the slowdown you're referencing is if you look sequentially, last year, as rates were rising, remember, we have about 15% of our portfolio in floaters, those reset much more quickly than the rest of the portfolio. Those floaters have pretty much reset already. And that part of the curve where those floaters sit has been pretty flat for the last 90 to 100 days. And so we didn't get an uplift from the floaters but the rest of the portfolio will continue to see an uplift.

And then when you exit a business, for a while, the paid losses exceed the incurred losses because you're paying out things, you're not writing new business. And that's generally the case in the reinsurance business. But the areas you exited are largely short tail. And the paid to incurred ratio remains elevated. When do you expect the reinsurance reserve position to normalize and start to build again?

So Josh, this is Pete. I'll take a couple of questions. You've mentioned when will the reinsurance reserve position normalize again. I'd say the reinsurance reserves, we believe, are solid. And with all the actions we took at year-end, we're very comfortable with. When you look at the paid to incurred, you can remember the part of that incurred is on a net basis. And so the fact that we're now ceding more premium out in reinsurance actually has the net incurred number looking lower. So just by the fact that we're paying out those claims from prior years is going to make the reinsurance ratio look odd for quite a number of quarters until that gets normalized. So part of what's driving that is the fact that we are ceding more out, and that's kind of hitting the denominator right now on the reinsurance side.

And how does the Monarch Re relationship impact that as well?

Well, Monarch Re is one of our great trading partners right now, and we do cede to them where we were not ceding to them in prior years. And so that's one of the aspects of increasing the cede to 35% on the reinsurance side.

But does that mean that as long as you're ceding to them for a while, paid-to-incurred is going to be elevated for some time given that the net premiums are going to them instead of -- and the net losses are -- I guess because your net incurred will be smaller going forward because the higher proportion is going out to a reinsurance partner?

Yes. What we're saying is net earned premium is going to be lower. So net incurred is going to be lower. And then the pays are associated with where we've actually kept more of the business in the past. So it's going to be a bit of a change over the next probably good 6 to 8 quarters.

And then just bringing up full circle and thanks for all the questions, what does this mean for the long-term trend in the float in the company? Will it be stable for a while because you're paying out claims, because you're ceding more business and therefore, the float doesn't grow like it once did, if you were just holding everything and keeping all of your lines?

That is true when you think of just the reinsurance business, but overall, our cash flow continues to be nicely positive because overall, we're growing the business on a net written basis in total, Josh.

The next question comes from Elyse Greenspan with Wells Fargo.

My first question, I was hoping you could provide more details on like the repositioning in nonrenewals within your North America primary casualty portfolio. I know that was mentioned in the [ trained press ], but it was also confirmed by the company. And does that -- I think you addressed your reserves somewhat in the prepared remarks, but does that article also mention -- also allude to perhaps if you're non-renewing and repositioning that book, that you might choose to do another deeper dive into some of those reserves?

Elyse, this is Vince. I'm not certain what article you're referring to, but I can speak to what we're doing at AXIS in our primary casualty business and liability classes very specifically. So first, as I noted already, as part of our reserve strengthening action, we examined liability classes, we identified a number of underperforming segments within our primary casualty business. We undertook a communication strategy with our wholesale business partners, indicating what our appetite and expectation would be around rate as well as our go-forward appetite. This business is being diversified in terms of class. It is continuing, that will obviously provide, in the near term, an impact to our top line production in that unit in the first quarter. As an example, primary casualty was down some 26-odd percent from the prior year. This is all part of the reshaping that's been expressly communicated to our business partners. In respect to the reserve review, we feel very confident, as both Pete and myself expressed in our opening remarks about our reserve position. We have no concern whatever that's resulting from the first quarter. We're pleased with both the progression of our primary team advancing our new underwriting strategy. We're pleased with the courtesy of our communication strategy with our wholesale business partners. And so it will take time, but we have a number of other revenue sources to offset that growth.

And then my second question, if we kind of normalize for the bridge losses, right, which went through the current accident year, I think my question is on the loss ratio with the current accident year loss ratios in both insurance and reinsurance. Are those good modeling points for the rest of the year?

So Elyse, this is Pete. I'll take that question. I think, one, we don't give guidance, but what I would say is we expect the portfolio for the remainder of the year to be a lot like the portfolio we just had in the first quarter.

And then from a top line growth perspective, within insurance, kind of got back to the double-digit growth in the quarter. Does that feel like -- I know there's pushes and pulls to different business lines, but do you feel like you'll see kind of double-digit top line premium growth over the balance of the year?

We don't provide guidance, but I think the guidepost I'd leave you with, and we've communicated in the past, is a range, right? We see a range in our insurance business somewhere between 7% and 12-odd percent of growth over the balance of 2024. We have a number of new initiatives to source produce new revenue streams. We're fairly bullish in our existing premium adequate lines, which is our entire insurance portfolio at the aggregate level, but we're going to cycle manage, Elyse. And so we're not giving guidance, but we have an expectation of continuing to grow our insurance business. And we have a great leadership team and a number of new teammates to help support that ambition.

This concludes our question-and-answer session. I would like to turn the conference back over to Vince Tizzio for any closing remarks.

Thank you again for joining us today. I'll express again my appreciation to the AXIS team for producing an excellent first quarter. We believe that the strong premium growth, new business generation that we're producing are signs of what is more to come. We're very pleased with the first quarter. I want to thank all of you for taking time to join us today and we look forward to having the opportunity to speak with you in more detail at our Investor Day on May 30. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.